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DeltaForceIT Austin Event – April 13-14

In conjunction with our strategic partnership with Open Spectrum Inc.  we are very excited to be a part of this upcoming event and many to follow!

Brought to you by trainers with recent, relevant hands on experience from Open Spectrum Inc. and Data Center Evolution – DeltaForceIT training sessions educate and equip attendees with the most relevant and unbiased, provider neutral intelligence on the data center, hosting, network, and related “cloud” computing industries. This unique training program goes far beyond standard technical jargon and digs deep into what makes the rapidly growing data center marketplace tick.  For buyers, operators or investors who want to better understand the business of the data center marketplace, attendees will learn how providers differentiate themselves and how commercial deals are actually done.

 

Scheduled Dates: April 13-14

 

Location:

Austin Metro Center

7500 Metro Center Dr.

Austin, TX 78744

 

Sample Testimonials

Richard Donaldson, Director Global Managed Services, eBay

“Having bought and sold many megawatts worth of power within data centers around the world and started and sold a managed services firm in the past, I can assure you the Delta Force IT boot camps should be the de facto training for anyone who wishes to take themselves seriously in the industry.”

 

Erich Kaiser, Director of Sales, CoreSite

Thank you for the valuable and insightful DeltaForceIT training. I must say, again, that I have never been in an industry focused training that covered the history, scope and core sales knowledge the way you did within a short 2 day training. Nice work!

 

For more information and to register:

http://www.eventbrite.com/o/delta-force-it-2116040317#live_events

Plan B for IT – Don’t be a Sticky Revenue Victim

 

Monthly Recurring Revenue on fixed term contracts is the godsend of predictability and high valuation for any type of service business.  Even better is Monthly Recurring Revenue that is “Sticky”.

Sticky revenue is generally tied to charges for services that would be difficult for a customer to change, replace or cancel.  For a service provider the revenue practically becomes an annuity they can count on.  Sticky revenue ultimately leads to overall low contract churn rates even when the provider isn’t providing quality technical service or a good customer experience.  Ultimately, Sticky Revenue is an enormous benefit to technology vendors but can become a nightmare for customers who don’t have a Plan B for their IT.

Six Tips to Avoid Being a Sticky Revenue Victim

  1. Recognize your position early: Before entering into a fixed term contract understand how difficult it would be to make a change when that term expires.  It’s critical to understand the overall cost, level of internal effort and timeline would be to execute a change.
  2. Understand the rules of contract changes and additions:   For example, not being able to add services coterminous to the initial services can create a real issue when the initial services are up for renewal especially if those services are functionally tied to each other.  This is an item that needs to be reviewed and clearly understood before the initial contract is signed.
  3. Don’t Count on the Sticky Revenue Vendor to help you: Even the most honest of vendors is not going to put a red flashing light on their sticky revenue and warn their customers they could be getting much better rates. Taking care of their business is what they do all day, every day.  Good ones (ones you would want to invest in) know exactly what their profit margin is for every single customer at any given moment. They have no interest in reducing that profit margin for themselves or their investors so it is incumbent upon You the customer to be prepared.
  4. Start Early in Negotiations: Starting a negotiation late or too close to a renewal date is probably the most common blunder made by customers. Never underestimate the intelligence of your vendors.  They know if a customer is prepared to make changes or not.  Showing a vendor that you are ready, willing and able to make a change levels the playing field in a negotiation.
  5. Stay in tune with the current market: This is easier said than done as most IT departments don’t have the internal resources, experience or expertise in all the services that would be applicable to sticky revenue.  It is absolutely critical to know if market rates are going up or down for any given service.  Typically in IT most services go down in price per unit as competition and efficiency increase.  Also understanding the benefits of new service models or pricing models that emerge can be of high value which can create a competitive advantage in service delivery for organizations deriving direct revenue from their IT.
  6. Embrace Vendor Neutral Expertise:  There are a growing number of provider neutral advisory firms like Kiamesha Global that have hands on experience within the various sectors of the IT service provider community.  Leveraging this expertise can be of enormous benefit to organizations that do not have the time to concentrate on constant market movements or to field an abundance of calls from direct sales representatives.  Whether looking at new services or evaluating existing contracts, vendor neutral expertise can indeed help to keep you from being a Sticky Revenue Victim.

About the Authors:

Todd Smith and Kevin Knight are the principals of the data center marketplace advisory firm Kiamesha Global LLC (www.kiameshaglobal.com). 

If your organization is considering the potential benefits of a data center relocation, expansion or simply want to better understand your current situation and options around data center build, colocation, cloud, wide area network or data migration services in the data center marketplace, Todd and Kevin can be contacted via e-mail at tsmith@kiameshaglobal.com and kknight@kiameshaglobal.com.

Data Center Wars San Antonio – Underserved with a Bright Future

A special thanks to Mario Hernandez, Tom Long and the entire San Antonio Economic Development Foundation team for their hospitality in providing me and a handful of other data center market consultants (including one of our business partners Andrew Marcus of Transwestern Real Estate) an in-depth three day tour of the San Antonio Technology Scene last month.  If you or your organization have an interest in learning more about San Antonio’s data center market please contact me directly at 713 553 5123 or tsmith@kiameshaglobal.com

 

As one of the largest and fastest growing metro areas in the United States with a vibrant, well-diversified economy, San Antonio has a storied past, a thriving present and a future with significant upside.  With a strong foundation of economic strength in public and private sectors, San Antonio has many ingredients that make it a serious contender in the data center market and overall technology space.

From AT&T to Rackspace & Microsoft

While AT&T still maintains a significant corporate presence in San Antonio, it was surely a blow to the City of San Antonio when AT&T relocated its headquarters to Dallas in 2008.  Rackspace, a late 1990s upstart founded in San Antonio by local Trinity University students has picked up much of the slack as it has emerged as a managed cloud computing powerhouse with over 6,000 employees globally (A sizeable % of those in San Antonio) and nearly 2 billion in annual revenue.  Since 2009 Microsoft has made massive investments in San Antonio with major data center builds and investments in clean energy initiatives.  These developments have more than made up for the partial departure of AT&T.

Cyber Security Hub

Home to numerous US military bases including Lackland and Randolph Air Force – San Antonio has a rich pool of cyber security talent to draw from as this sector becomes increasingly in demand.  Current Department of Defense cyber security operations are plentiful and private security firms are popping up to support these initiatives.  Due to the secrecy of much of the federal operations San Antonio’s image as a cyber-security powerhouse hasn’t fully come to the forefront but the secret is definitely finding its way out.

Proximity to Austin

The Texas capital city of Austin, while smaller in size and without the military foundation, still has a clear cut advantage over San Antonio when it comes to image as a tech town.   Austin is simply a more popular place to be in the eyes of many millennial techies.  With both cities growing at an accelerated clip – With only 70 miles between borders they will at some point become a join metro area much like Dallas/Fort Worth.  A Greater San Antonio / Austin of the future could become a true global, techno juggernaut.

Private Enterprise Data Centers

San Antonio is home to numerous major corporations in various sectors with significant data center requirements that are largely filled internally.  USAA, Valero, Tesoro, HEB, CPS Energy, Frost Bank, Clear Channel Communications and Security Service Federal Credit Union are some of these notable names.  San Antonio has become notable for its large private enterprise data center builds although the ones we have run across are typically far overbuilt in terms of size and capacity to serve the needs of their owners.   They also have come with extremely high price tags often 2 to 3 times higher per megawatt of infrastructure when compared to commercially available green field or colocation sites built to similar security and reliability standards.

In most cases, building and operating your own data center facility has been proven to be an inefficient model, one that is fading away at a rapid pace as data center operators are able to show enterprises around the globe how expert they have become at building robust, secure, redundant, accredited facilities at a fraction of the cost.

Commercial Data Centers

Stream Data Centers and CyrusOne both have a major data center presences in West San Antonio that are focused on serving the wholesale and enterprise colocation space.    For sizeable organizations looking to outsource production or large secondary facilities – these are the only real options within Greater San Antonio at the present time.

SATC is a local provider in North Central San Antonio that caters to small/medium size local businesses with office, connectivity and by the rack colocation services.  CityNap located downtown and Site B Data Services located on the near West side also cater to the SMB markets with a range of managed and carrier neutral services.  XO and Level 3 offer a typical carrier colocation services without bells and whistles.  Geekdom a tech startup incubator offers low cost office downtown office space and services to support local entrepreneurs.

Overall for the size of city with so many large enterprises this is presently a very lean market with very few options for outsourced data center services.

Market Advantages for Commercial Providers

Commercial providers should be seeing the lack of current competition as an opportunity.  There are also additional cost and risk advantages that are significant.

One major advantage commercial providers have to attract business not just in San Antonio but outside the area is its very low relative cost of power.  With multiple mega-watt use the net cost per kW/hour can be as low as $.05 which is significantly lower than neighboring Austin.  For high power data center usage this can result in dramatic savings.  Land is also plentiful and even though attractive areas for data centers like Westover Hills are getting tighter there are still other areas to build with attractive power and connectivity assets that will work quite well.

San Antonio is absolutely of the best locations for disaster avoidance.  There is minimal possibility for earthquakes or severe weather of any type to occur.

The Future

San Antonio is well on its way to becoming a real player in the US tech scene.   For the data center industry it is surely an attractive spot to put build a facility for cloud services or colocation services due to overall low costs and low risk of natural disaster.  Building green field may be an option but at some point some of the overbuilt enterprise data centers may be the best route to entry.  Some of these owners will surely come to the conclusion that selling their private data center asset to a professional operator and allowing them to lease the unused capacity to other enterprises is a safe, secure and likely wise financial decision.  Regardless of the path it takes the sheer growth of San Antonio’s industry will lead to a more developed data center marketplace.

 

Data Center Wars – DFW Part III – New Players

In this installment of the series, we highlight some of the newer players making a splash in the DFW market. We want to thank David Liggitt and the datacenterHawk team (www.datacenterhawk.com) for their significant contributions to this article and series.

 

Wholesale Rates with Retail Service

Dallas based Carrier-1 is a great example of the hyper competitive nature of the current DFW marketplace.  They have recently launched a 106,000 square foot site located a few miles east of downtown Dallas capable of providing 60,000 square feet of white floor and 30,000 square feet of office space for customer use. The site also offers a direct connectivity service to Equinix at the Dallas Infomart to use their internet hub and peering exchange.

While this is a site that provides redundancy and solid uptime features the main differentiator is that Carrier-1 is positioning itself as a hands on retail service provider that offers “wholesale rates”.  On their website they compare themselves directly to Digital Realty Trust who has traditionally been the standard bearer in the wholesale space.

New data center providers positioning themselves this way with inventory of any quality indeed put pressure on incumbent providers not just for new business but also for their existing book of business.  Lower price points and efficient metered solutions typically reserved in the past for 250+kW customers do change the game.

 

A National Player Makes a Texas Sized Splash

Well-established Atlanta based provider QTS (Quality Technology Services) threw its hat into the Texas market with its 2014 launch of a 700,000 square foot retrofitted semiconductor plant it purchased in 2013.  This site located in the central metro area city of Irving is designed to meet the modern power and uptime requirements of enterprise data center users.  QTS is also providing a suite of cloud and managed services directly to its customers.  QTS with other large, successful developments throughout the United States is an immediate, serious competitor in the DFW market.

 

Enterprise Wholesale Data Centers – Skybox Data Centers

Dallas based Skybox Data Centers based company which focuses solely on the ownership, development and operation of wholesale (1 MW+) facilities for enterprise grade users. By focusing on this subset of the market they provide large, Fortune 1000 companies great economies of scale in their operation which are often difficult to achieve in the multi-tenant halls of traditional colocation firms. Founded by former Trammell Crow executives and data center specialists at Cushman & Wakefield the company has a combined track record of over 50 million square feet across the US.  Skybox has recently launched a brand-new 20 acre campus in Houston and a 100,000 SF 12.5 MW greenfield data center which they recently leased the first phase of prior to completion.

The team has significant experience in the DFW market has great interest in local projects while nationwide opportunities continue to be explored.

 

Micro Data Centers – Dartpoints

This firm based in Downtown Dallas is taking a niche approach to the market by staying away from the slugfest that is occurring with the big box wholesale and large retail colocation developments.  Dartpoints aims to take the data center to the users typically within large, multi-tenant buildings.  By providing colocation services within multi-tenant buildings, Dartpoints gives companies an option of keeping all or part of their data center in reach of their local area network without having to take on the headaches of building and maintaining their own server rooms or closets.  This is also a significant benefit to the building owner and landlord by making the building more attractive to current and prospective tenants.

With three “Micro Data Centers” already launched and in operation within the DFW market (Dallas, Plano and Fort Worth) Dartpoints looks to continue focusing on developments with the area with three additional DFW area projects in the pipeline.

 

DFW Going Forward

There is no doubt that DFW has become a power house data center market in comparison with the national and even global landscape.  While we have touched on many providers and locations in this series covering the entire DFW market and all its inner workings could be a 200 page book.  During our discussions with some of the  providers during our research for the series many have told us that they have projects in the works that are not yet ready to be publicized.   With all the current options and more on the way soon we see that DFW will continue to thrive and offer continuously improved services for the foreseeable future.

 

The Criticality of Standards & Compliance in Colocation – by Dan Vazquez

Colocation providers are not made equal when it comes to standards and compliance.  Some simply don’t look at standards and compliance as being vital to the success of their business.  The problem with that line of thinking is that standards and compliance are becoming increasingly more important to organizations seeking colocation services.  Today’s customers are a lot more sophisticated then even customers from 5 or 10 years ago.  Having third parties audit colocation providers helps customers feel assured that certain actions have been put in place.  For the most part; customers do not accept a colocation facility stating we are concurrently maintainable or that they meet certain physical security standards.  They want the proof.  The issue is most colocation buyers don’t have the budget for a PE, ME or EE to check the resiliency of the facility.  Also, just because a colocation company meets a standard today doesn’t mean they will meet it in the future when the standard is updated or changed.  Customers want assurance that their data and systems are safe and secure in a resilient facility.

The Different Standards

There are a number of standards and it is not cost effective for a colocation company to go after them all.  What standards are important to a colocation company?  Standards can be broken down into three basic groups.  Sustainability standards such as LEEDs or Energy Star help a potential customer to understand that a colocation company is looking to be a good corporate citizen and trying to reduce overall cost or impact to the environment.  Facility redundancy standards, such as Uptime, TIA 942, BICSI 002 for example, help a potential customer understand how resilient the facility is.   Industry, governance or internal required standards; such as, SSAE16, PCI-DSS, HIPPA, ISO 27001, FISMA/FEDRAMP, DR/Business Continuity and others are related to business requirements. Understanding what standards are important to a potential customer base could be as simple as understanding the industry or market that you are interested in.  In the colocation business a common saying is many people can say no to a deal but only one can say yes.  Not having certain standards in place can impact a colocation provider’s ability to compete for additional business or qualify on RFPs.

Not just pieces of paper – they can really help

Standards can also help the actual operations of the colocation facility.  Industry, governance, or internal required standards require self-assessments.  A colocation company has to understand what is important to their business, identify the risks to the business and put life cycle management in place.  They need to train their staff, set up review boards, have an incident process, and complete post-mortems.  An educated colocation staff is better equipped to catch and resolve problems prior to them becoming critical issues.  Meeting redundancy standards means the staff has a certain design and maintenance equipment available.  Staff can perform necessary changes to the environment and be comfortable about the outcome.  They will have certain equipment available that allows them to perform specific checks or tests and have the proper monitoring and notification in place.  A colocation company that has a number of customers or plans on having a number of customers without compliance in place will have their staff performing countless policy reviews, process reviews, and site walk-throughs with external auditors.  If a colocation company has customers that are managed service or cloud computing providers there could be countless more audits and reviews.  Many larger colocation buyers have external vendor audit requirements in place which require additional audits and reviews.  Without standards and compliance a colocation company can have staff performing audits and reviews versus maintaining or improving the facility.

Simply a must have to be successful

Standards and compliance is ‘Not a check box.’  Standards and compliance helps a colocation company be better equipped to support their customer base.  It tells potential customers that you understand their industry and that their business is important to you.  It tells potential customers that the environment and efficiency is important.  But, more importantly, it helps to protect both the colocation company and its customers.  By having staff properly trained they are better equipped to maintain the facility.  The policies and processes will be more thorough and there will be regular reviews.  As the data center industry continues to mature having a mature and disciplined process will be a must have to succeed.

About the Author:

After retiring from the United States Air Force, Dan Vazquez has spent the past 15 years in the data center colocation industry with Texas based colocation specialist CyrusOne.  Dan was one the original executives at CyrusOne and held a number of executive positions including three years as the Head of Audit & Compliance.  Dan is currently an independent data center industry consultant and provides guidance to the Kiamesha Global team and its customers on various aspects of the data center industry. 

 

Data Center Wars – Dallas / Fort Worth Part Two

In this installment of the series, we delve into the roots of the DFW data center market and what the well-established players are doing today. We want to thank David Liggitt and the datacenterHawk team (www.datacenterhawk.com) for their significant contributions to this article and series.

The Dallas Infomart – 1950 North Stemmons Freeway

Built in 1985, the Infomart was designed to be one of downtown Dallas’ largest tech centers. This lineage enabled the distinctive seven story, 1.5 million SF facility to become a fiber connectivity nexus for over 70 carriers by the 2000s. Attracted by the high-performance connections and proximity to Dallas’ urban center, colocation providers leveraged the Infomart’s dense connectivity to serve their customers. Well-known data center and Cloud service firms such as Equinix, Cologix, zColo, Softlayer and Viawest currently operate significant data center footprints within the Infomart. Each of these providers offer a variety of colocation, managed service, cloud and interconnection services.

In 2014, the Infomart was officially renamed Infomart Data Centers due to a merger of Fortune Data Centers and Infomart Dallas. Since then, the new company has been upgrading various technological aspects of the building, with 3 MW of turnkey colocation space to be available June 2015.  With these investments, Infomart Data Centers will continue to be a relevant, thriving ecosystem within the data center market for years to come.

2323 Bryan and Beyond – Digital Realty

Less than two miles away, Digital Realty’s 2323 Bryan data center in downtown Dallas shares a similar history. Digital used their well-developed wholesale data center model to convert the 477,000 SF office building to host data centers for smaller companies. Leveraging ample fiber providers and opportunities to grow, Digital Realty has attracted notable names such as CyrusOne, Telx, Equinix, and zColo. Like the Infomart, 2323 Bryan is now one of the most connected buildings in North Texas.

In addition to 2323 Bryan, the San Francisco-headquartered Digital Realty made significant investments in the DFW market, especially in the northern suburbs of Richardson, Lewisville and Carrollton. The colocation provider acquired the former Collins Radio Campus in Q4 2009, a 68-acre site in Richardson they later named Data Center Park Dallas. The site included an on-site, private substation that Digital Realty uses to lower power costs for tenants at the park. The company is currently building a new 138,000 SF Richardson facility at 907 Security Row. Several Fortune 500 users and colocation/cloud providers such as Data Bank, Rackspace, SoftLayer, and Verizon Terremark currently call the park home.  The investment in Lewisville was also quite significant with a 2012 price tag of $123 million for The Convergence Business Park, a 168-acre multi-building campus totaling 819,000 SF of real estate. The campus tenants included robust private enterprise and a major data center operator which we will discuss later in this article.

Legacy Telecom Facilities

Several large telecom companies found sites in DFW they could develop themselves. For example, AT&T built their AT&T Internet Data Center in 2001 at the Millennium High-Technology Office Park in the northern suburb of Allen. Like their rival, Verizon has also constructed data center facilities in DFW and acquired more market share via its 2011 purchase of managed service and hosting providing Terremark Worldwide.

The standalone legacy facilities of big telecommunications firms still operate here, but with less relevance. This is due to so many carrier-neutral data centers and colocation facility options throughout the DFW market.

CyrusOne

CyrusOne’s entrance into DFW was a presence in 2323 Bryan as a safe-distance/secondary footprint offering for its mostly Houston-based customers. CyrusOne’s real splash in DFW came in 2009 when it entered into a sizeable lease at Lewisville’s Convergence Business Park (now owned, as previously noted, by Digital Realty).

Selling enterprise colocation services at Convergence contributed to CyrusOne’s post-2010 growth. This led to its purchase of 1649 W Frankford, a 650,000 SF former warehouse for Home Goods. While this massive facility also includes their corporate headquarters, 1649 W Frankford will have 400,000 SF for technical space at full build out. CyrusOne has already developed and leased multiple data halls as it continues to move further into large retail and wholesale colocation. From its modest roots as a privately-funded data center upstart and Digital Realty tenant, CyrusOne has grown into a Real Estate Investment Trust (REIT), established public company (CONE), and a dominant player in the DFW market.

More to Come

In the next addition we will be focusing on new players and service models that have been entering the DFW marketplace.  Stay tuned…

 

 

Data Center Wars – Dallas/Fort Worth – Part One

There is a saying that everything is big in Texas.  While that may just represent a bit of the brashness we have a reputation for in the Lone Star State, the saying definitely holds true when it comes to the DFW data center market.

With the largest metro population in the Southern United States of nearly 7 million, and a metro area land mass larger than the states of Connecticut and Rhode Island combined it is a big market just on these terms.  In addition to its sheer size and population, its central US location, rich telecommunications infrastructure and relative safety from natural disasters Dallas/Fort Worth has become one of the most popular destinations for major data center developments.

A Highly Competitive Buyer’s Market

With a variety of data center facility options this is currently a highly competitive buyer’s market.  Significant capacity and new entrants have come on line in recent years.  David Liggitt is the President of datacenterHawk, a web-based platform providing advanced research and tools to data center market professionals (www.datacenterhawk.com).  His firm keeps a watchful eye on these market developments and trends.

“The Dallas/Fort Worth colocation market has grown considerably over the last three years,” Liggitt says.  “Data center users are attracted to DFW because of the affordable power costs, abundance of fiber, tax abatement opportunities, and the competitive nature of the colocation market.  The area appeals to a wide variety of industries, including financial, technology, insurance, telecom, and healthcare companies.  Some of the largest cloud service providers also have a large presence in Dallas as well. The 208 MW of commissioned colocation power makes the DFW market the third largest in the United States.”  With the majority of this capacity under lease, he tells us there is an additional 18 MW of colocation power currently under construction to meet demand. Data center providers are eyeing future growth in Dallas/Fort Worth, with approximately 180 MW planned for development when opportunities arise.

Competition is Compressing Pricing

The competitive market dynamics are also impacting pricing in DFW.  “From an economics perspective, data center operators have been aggressive over the last twelve months.  Colocation pricing has decreased by 8-10% on larger DFW transactions,” Liggitt says.  “Data center providers have also been working to provide a wider range of services. Most in Dallas/Fort Worth have invested significantly over the last few years by increasing offerings like fiber site interconnection, direct connectivity to cloud providers, and increased managed services.”

More to Come

There is a lot to cover with the DFW market from robust, central telecommunications hubs to massive wholesale developments in the north so we are going to break it down into pieces over the coming weeks.  In Part Two of this series we will delve into the history of the DFW Data Center Market and what some of the original data center operators have been doing to evolve as demand and competition continue to heat up.  Stay Tuned…

 

Data Center Wars – The Falling Price per kW

About the Authors:

Todd Smith and Kevin Knight specialize in the data center facility market working for technology advisory firm Kiamesha Global (www.kiameshaglobal.com).  If your organization is considering the potential benefits of a data center relocation, expansion or simply want to better understand your options in the data center marketplace Todd and Kevin can be contacted via e-mail at tsmith@kiameshaglobal.com and kknight@kiameshaglobal.com.  Special thanks to Sean Patrick Tario, CEO of Open Spectrum Inc. www.openspectruminc.com – a Kiamesha Global business partner in the newly formed Renegade Trust – for contributions to this article.

 

From Bust to Boom

The data center industry has come a long way since the “Dot Com” bust of 2000.  As waves of new facilities have come on line throughout the major metropolitan areas of the world, data center service options have become abundantly available to the business consumer.  With this abundance of options hitting the market the overall price per kW of data center infrastructure has fallen significantly for a number of reasons.

Competition is Fierce Bobby Wagner Authentic Jersey

In the recent past the most formidable competitor that data center operators faced was the “in-house do it myself the way we have always done it model”.  Financially speaking the “Build vs. Buy” has become an increasingly easy sale for data center operators to make.  With the cost per MB of data transport plummeting and now with it being a norm in business culture to outsource a data center facility in many cases it has simply become a no-brainer decision.  Data center operators are now going head to head like they never have before for the same business in the same markets with customers that are already convinced to outsource.  The new entrants and established players are in a high speed race to bring on new clients with the hope that industry churn rates will remain extremely low.  Cloud providers are often the most coveted prospects as the successful ones have proven to be very high growth tenants.

With this increased competition it has simply become a buyer’s market.  Don’t let supply and demand trick you.  While there are  some cases that tight supply may indeed drive up the kW price temporarily, in the major markets the data center providers are ready, able and willing to put more capacity on line quickly to meet demand.  Also, with the development of inter-site connectivity platforms most of the major national/global players have deployed it is becoming easier to tap into available capacity throughout a provider’s facility portfolio.

Cheaper Investment Money is Abundant

Many of the larger data center providers have structured themselves as publically-traded Real Estate Investment Trusts (REITS).  While there are restrictions to being a REIT which mandate the overwhelming majority of revenue be lease versus service related, there are significant tax advantages to this structure.  A publically traded REIT in a very low cost of capital environment is able to put large investments in play.  These investments are providing the marketplace larger, higher-density, “future-proofed” facilities that have a wide range of amenities.  Even with the REIT restrictions there are creative ways that these companies are able to provide value add services to their tenants such as variations of cloud and managed services to operate and interconnect within their facility portfolios.

Larger More Efficient Builds

The large low-interest investments being made are providing greater economies of scale and efficiency.  Investing capital in driving down the cost of cooling has been a major focus of many of the serious contenders as they seek a long term advantage in lowering the operating expenses for themselves and their customers.  For those of us that model data center offerings for a living we know how much of an impact just a couple fractions off the PUE (Performance Utilization Effectiveness) figures can make.  When you have the capital to spend now to save money for many years to come it is an easy choice to make.

The Future

There are many more reasons for the falling price per kW of infrastructure.  Some of them are more complex than others.  Customers should not expect to see this trend continue indefinitely as they have come to expect with items such as compute, storage and network.  Power and cooling infrastructure are more industrial in nature and not items that fall dramatically in price themselves.  Other market forces such as business closure and consolidation will be coming into play as some providers struggle to compete.

 

 

Data Center Wars Phoenix – An Oasis of Megawatts

On a recent trip to Phoenix I was able to get a good look at what this fast growing metropolitan area, now the 5th largest in the US, has to offer in the way of data center facility and service options.  It is definitely a  fresh, vibrant market full of new capacity and innovative approaches to serving the thriving local economy. It is also an attractive disaster recovery option for those seeking an area well buffered from most natural disaster occurrences.

DeltaForceIT

The backdrop of the visit to Phoenix was my attendance at an open DeltaForceIT (http://deltaforceit.com/) event that was hosted at the Viawest data center facility in North Phoenix.  DeltaForceIT is the brain child of Sean Patrick Tario, a Northern California based data center industry author and trainer.  He is also the CEO of Open Spectrum Inc. (http://openspectruminc.com/), a firm specializing in consulting on the buy side of the data center marketplace.  This training is like no other that I have seen in the industry as its primary focus is to provide a greater understanding of how the data center marketplace works from a business standpoint versus having a primary focus on the best practices surrounding the technical engineering of data centers.

It was great working with Sean and the group in attendance from CyrusOne, PhoenixNAP, Viawest and the team from Silver Star Communications that flew all the way down from Wyoming.  Everyone was there to gain a better grasp of what makes the rapidly growing data center industry tick and to become more fluent in the language of the data center.  I am quite impressed with the DeltaForceIT curriculum in fact  Kiamesha Global is now partnering with Sean around the delivery of its content both locally within our Texas base and around the globe.

“I am thrilled to have Todd and his team at Kiamesha throwing their weight behind DeltaForceIT moving forward. They are the ideal partner for us, as they have deep experience working both on the buy and sell side of the data center industry and a track record operating as true value add consultants for their clients.” Sean Patrick Tario, CEO, Open Spectrum Inc & DeltaForceIT

Phoenix Providers Visited

Our gracious hosts at Viawest provided the group with a tour of its relatively new operations in the Phoenix market.  The Viawest facility was originally built only a few years ago by Cox Communications for their own internal purposes, sparing no expense. Cox now serves as the anchor tenant for the property after selling to Viawest. With 42,500 square feet of raised floor designed to accommodate 250+ watts per square foot it is a well built, carrier neutral, and high security option in North Phoenix for clients looking to expand in the region.

PhoenixNap, a privately held firm and data center that is located just south of the Sky Harbor Airport in Phoenix. They serve as a hands-on colocation provider that offers a number of managed hardware and cloud based service options.  They run a high-availability, high density colocation site with a multitude of carrier options as well. Its operations are definitely designed for those who are enamored with security, as their setup was as elaborate as I have seen.

CyrusOne, a publically traded company headquartered in Texas, is a relatively new player in the Phoenix area, but has been successful in a making a splash with its master plan for a 1,000,000 square foot campus sitting on a large piece of land in Chandler, in the Southeast part of Greater Phoenix.  This campus originally broke ground in June 2012 is already quite large as they have been successful in leasing the first phase and now on to the second with its now trademarked Massively Modular® Data Center Technology.

Nextfort, another new player to the Phoenix market with its first site launched in late 2013 in Chandler almost next door to the CyrusOne and Digital Realty Campuses. Nextfort however has taken a modular approach to their design, offering private, walled-off, fully metered suites that can accommodate @ 20 high density cabinets at extremely aggressive price points.

Additional Phoenix Data Center Colocation Options

For a complete list of all colocation options within the Phoenix market, I highly recommend you check out the Data Center Market Report Sean and his team have created after hours of research and touring the local market.

http://openspectruminc.com/wp-content/uploads/2015/01/Phoenix.pdf

 

Data Center Wars Chicago – The Lines Have Blurred

Prevailing wisdom would have you believe that there are two distinct data center markets in Chicago; city vs. suburbs.  While it may be easier to divide the market geographically, it does little to inform data center users of any distinct differences in the market place.   As the lines between retail colocation, wholesale data centers and managed service/cloud providers continue to blur it becomes ever more critical that end users understand these subtle differences and their long term influences.

Legacy Wholesale Providers

New competitors along with the changing focus of existing data centers will have far greater impact on the Chicago market in 2015 than simple geography.   On the wholesale front, planned expansions by DuPont Fabros in Elk Grove Village and Digital Realty in Franklin Park are underway.  Recent activity by both companies has shown increased emphasis on pursuing smaller colocation opportunities that fall outside of their traditional areas of expertise.   New wholesale competitors in the Chicago area already working under a similar hybrid approach include both QTS with their recent acquisition of the former Sun Times plant and Byte Grid acquiring the former CNA Insurance facility in Aurora.

A common theme among most of the wholesale companies listed above has been a slow move towards vertical integration.  In addition to wholesale/retail integration, network solutions and cloud connectivity options have also become quite prevalent among the traditional wholesale providers.  This is a trend that we first witnessed in the retail space with Equinix offering of Financial Exchange and Equinix Exchange services.  Equinix has since expanded offerings into areas as diverse as CDN and WAN Optimization.   Expect to see this trend accelerate as a result of acquisition and consolidation within the industry (see Latisys/Zayo) with the possibility of data center providers starting to look more like legacy telecommunications companies.

Legacy Retail Providers

Among local Chicago area retail providers, expansions of existing facilities have also been on the rise.  Latisys very successful Oak Brook facility has initiated yet another 25,000 sq. ft., 3.6 megawatt expansion.  Continuum Data Centers has also pursued expansion through their recent move from their Lombard location to their new recently upgraded, 80,000 sq, ft, facility in West Chicago.  Altered Scale in downtown Chicago has also recently completed extensive upgrades to both infrastructure and client amenities to attract a wider cross section of end users.    Additionally, we have heard of a rumored expansion of the Savvis/Century Link data center in Elk Grove Village, IL.

Hybrid Providers

Probably the most interesting newcomer to the Chicago market has to be long time engineering and IT Consulting firm Forsythe Technology.  With their new 221,000 sq. ft. Elk Grove Village data center offering private 1,000 square foot client suites, Forsythe has put a new spin on wholesale/retail hybridization.   The new development will be worth watching due largely to Forsythe’s unique approach of offering consulting services to support everything from move logistics to hardware and software installation and maintenance.   While this does appear to be the most vertically integrated data center solution we’ve seen in the area, there are still many questions surrounding this unique approach.

If you are in need of a more detailed view into the Chicago data center market, please contact us directly.  Todd and Kevin can be contacted via e-mail at tsmith@kiameshaglobal.com and kknight@kiameshaglobal.com.

 

About the Authors:
Todd Smith and Kevin Knight specialize in the data center facility market working for the technology advisory firm Kiamesha Global (www.kiameshaglobal.com).  If your organization is considering the potential benefits of a data center relocation, expansion or simply want to better understand your options in the data center marketplace, Todd and Kevin can be contacted via e-mail at tsmith@kiameshaglobal.com and kknight@kiameshaglobal.com.  Even if you have no changes under consideration for the New Year, they would welcome the opportunity to provide you with an assessment of the current market value of your existing data center portfolio’s in-house and/or collocated facility assets in order for you to better recognize where you stand in this rapidly evolving market.